News Digest | September 7, 2018 | Palo Alto Weekly | Palo Alto Online |

Palo Alto Weekly

News - September 7, 2018

News Digest

Theranos shutting down permanently

Theranos Inc., the Palo Alto-based blood-testing company whose former CEO and chief operating officer were indicted by a federal grand jury earlier this year for allegedly defrauding investors and patients in a multimillion-dollar scheme, is shutting down, according to the company's CEO and general counsel David Taylor.

In a letter to stockholders, Taylor said Theranos had been working with an investment bank that had reached out to more than 80 potential buyers over the past four months.

"Unfortunately, none of those leads has materialized into a transaction. We are now out of time," Taylor wrote.

Taylor said the company plans to seek board and shareholder consent to begin dissolving Theranos on Sept. 10.

The company has already begun negotiating a settlement with Fortress Credit to take ownership of Theranos, Taylor said. Theranos was in default for a loan with Fortress and owes at least $60 million to unsecured creditors, Taylor said.

Under the settlement, Fortress would take ownership of all assets, and Theranos would be allowed to distribute its remaining cash, about $5 million, to creditors.

Chief Operating Officer Ramesh "Sunny" Balwani and Theranos founder Elizabeth Holmes were charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud last March. The pair allegedly used advertisements and solicitations to persuade doctors and patients to use the company's services, despite knowing certain blood tests wouldn't provide accurate results, according to the indictment.

Palo Alto to explore new laws to protect renters

Fresh off of adopting an emergency law that requires relocation assistance be given to low-income tenants facing eviction, the Palo Alto City Council is preparing to consider on Monday broader and potentially stronger measures to aid local renters.

The council is set to discuss a memo from council members Tom DuBois, Karen Holman, Lydia Kou and Cory Wolbach to review and potentially strengthen the city's renter-protection laws. Among the changes that the four council members recommend exploring is stronger enforcement of an existing requirement of annual leases; additional mediation services for tenants and landlords; and "reasonable relocation assistance" that landlords must provide to tenants in multi-family developments.

The emergency law that the council passed on Aug. 27 dealt only with the lattermost issue. It established a required payment of $7,000 to $17,000 per household in relocation assistance. The law, however, stops well short of what most council members were hoping for. It only applies to complexes with 50 or more apartments. And, more controversially, it only covers households with an income level below Santa Clara County's area median income (for a single-person household, this amounts to about $86,000).

The new memo, which now includes Wolbach as a co-signer, does not include any restrictions on rent increases. Instead, it calls for exploring relatively non-controversial processes like mediation and stronger enforcement of an existing law requiring annual leases.

While the emergency ordinance was passed largely as a response to concerns from tenants of President Hotel, who are now facing eviction from the downtown apartment building, the permanent ordinance is aiming to address broader housing trends — namely, exorbitant costs and a shortage of supply.

Council treads cautiously on labor reforms

Seeking to add transparency to the normally secretive process of labor negotiations, the Palo Alto City Council is moving ahead with a plan to publicize every offer and counteroffer exchanged between management and labor groups during contract talks.

But before the plan becomes a reality, city officials are preparing to meet with every labor union to gauge their interest and solicit their concerns about the proposed reforms. The cautious approach, which would be followed by formal meet-and-confer sessions with each union, was adopted on Tuesday by the council's Finance Committee, whose members strongly support the proposed changes.

Under the memo's proposal, which loosely follows the city of San Jose's existing policy, every formal offer and counter offer would be posted on the city's website. Each would be accompanied by a fiscal summary prepared by staff, showing the costs and liabilities associated with each bargaining unit.

Yet in pushing for the reforms, council members are also taking care not to shake things up too much.

"The intent here is to inject an increase in visibility at certain checkpoints during the process," said Vice Mayor Eric Filseth, the lead author of the memo. "In the current circumstance, the first time the public has any idea of what's going on is when it goes to the council for an up or down vote."

—Gennady Sheyner


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